An Imported Idea for Affordable Housing

By ROBERT HAMILTON

Published: August 16, 1987

MUTUAL housing, a form of affordable, nonprofit housing popular in Europe, is being introduced in this country, with projects planned or under way in New York City, Connecticut, Washington, D.C., and Baltimore.

In addition, private housing agencies in Massachusetts, Mississippi, Kansas, Texas, Indiana, California and Hawaii have expressed interest in developing mutual housing, said Beverly Heegaard, director of mutual housing for the Neighborhood Reinvestment Corporation in Washington, a national nonprofit group that develops homes for low-income families.

The key to mutual housing is collective ownership that leads to reduced costs. It is typically cheaper than private housing because - unlike a cooperative, for instance -it is not bought and sold by individual owners seeking to make a profit.

On the Lower East Side of New York City, one group plans 50 units of mutual housing. It hopes to acquire five abandoned city-owned buildings at Second Street and Avenue B. A spokeswoman for the city's Department of Housing Preservation and Development, Lynn Guggenheimer, said a decision on the plan is expected in September.

In mutual housing, a nonprofit corporation owns the land and any buildings on it. Corporation members consist of current or future tenants in the either new or or renovated units.

Members elect a board of directors that usually includes tenants, people on a waiting list for the housing, representatives of the local business community and experienced real-estate managers. The board sets rents and makes other policy decisions.

Tenants pay a membership fee of several hundred to several thousand dollars when moving into a home. The fee is refunded with interest when tenants move out.

Rents may rise because increased taxes and maintenance costs, but they will not be raised to reflect higher property value.

Mutual housing has been successful in Europe, particularly in West Germany, where four million units have been developed since World War II, about one-third of the housing stock in that country.

The concept has not been as popular in the United States, where private ownership of a home is a primary goal for most people, and people who do not or cannot own homes have rented apartments, Ms. Heegaard said. In addition, public housing is available.

But in the last few years, Ms. Heegaard said, the cost of home ownership has escalated rapidly, along with rents. And for many people mutual housing may represent a middle ground between the two.

Connecticut will put into effect Oct. 1 the first law in the country that allows mutual housing to qualify for state grants and loans. It is expected to assist in the development of that state's first mutual housing project, 25 units to be built in the Blue Hills section of Hartford.

Low-interest government loans or grants can help pay for part of the cost of new construction or renovation. Membership fees usually constitute another 5 percent of development costs.

Typically, local businesses are also asked to contribute to a capital grant account to develop the housing, since they have an interest in making affordable homes available to employees.

Ted Malone, the Hartford field services officer for the Neighborhood Reinvestment Corporation, said that as a result of the new law, community housing organizations in Stamford, Norwalk and northeast Connecticut have contacted him for information on how to set up a mutual housing association.

The associations, Ms. Heegaard said, attempt to set rent levels at no more than 30 percent of the average income of tenants. Any money that the board has left after paying its annual costs is put into the capital grant account to develop more mutual housing units.

''The organization cannot stop with one development because you've got people on the board waiting for their own units, along with civic and corporate organizations which have a vested interest in seeing more affordable housing developed,'' Mr. Malone said. ''It's a sort of built-in drive to continue developing housing.''

IN Baltimore, which was the first mutual housing project developed by Neighborhood Reinvestment, rents are $273 a month for a one-bedroom apartment, $330 for a two-bedroom and $380 for a three-bedroom. On the private market in Baltimore, rents range from $350 for a one-bedroom to more than $700 for a three-bedroom.

The director of the Baltimore program, Cassandra E. Johnson, said that only two families have moved since the 49 units were completed in early 1984.

In Hartford, one proponent of mutual housing is the assistant city manager, Jeffrey A. Stewart, 28 years old, who lives with his parents.

Mr. Stewart, who grew up in the middle-class Blue Hills section, would like to remain there. But a four-room apartment rents for about $550 a month and up, without utilities, and that is more than many local and prospective residents say they can comfortably afford.

Mr. Stewart said he likes the concept of mutual housing, ''because while you don't have the equity, you have a lot of peace of mind - you know your rent isn't going to skyrocket because your landlord wants to pull a huge profit out of the property.''

State Representative Eric D. Coleman, the Hartford Democrat who introduced the mutual housing bill in the General Assembly this year, said it had strong support because it controlled rents without formal rent control.

''Certainly landlords have a right to a reasonable return on their property, and perhaps rent control would inhibit that,'' said Mr. Coleman, whose rent control bill failed to win passage last year.

''But with mutual housing we go a long way towards keeping the price of housing at an affordable level without infringing on the rights of a landlord,'' he said.

''There have been a number of issues where tenants line up on one side and landlords line up on the other,'' Mr. Coleman said. ''Mutual housing has succeeded to some degree in bringing the two groups together.''

The state's Deputy Commissioner of Housing, Yasha M. Escalera, said his department was excited about the possibility of using the new program to develop subsidized housing in rural communities.

Other state programs will pay only for large multifamily projects, he said, which by necessity must be situated in urban areas. But mutual housing can be as small as duplexes or single-family housing.

''There's enough flexibility in the program to give us the variety of housing we need to meet housing requirements throughout the state,'' Mr. Escalera said.

The mutual housing legislation allows the state's Department of Housing to develop regulations to issue grants and loans to associations for the development of low- and moderate-income housing.

The bill, which passed both houses of the General Assembly by wide margins, was signed by Gov. William A. O'Neill July 20.